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Mastek warns of 60-70% dip in net profit

NetScribes/Abhijit Basu

The Bombay-based Mastek Group has warned of a 5-7 per cent drop in revenues for the quarter ending December 2000. In a profit warning issued to the Bombay Stock Exchange (BSE) late Tuesday, the company cited non-payment by a large dot-com customer as the main reason for this dip.

"We expect a 60-70 per cent drop in net profit," Mastek managing director Ashank Desai told NetScribes. "These are only predictions; we will be in a position to release all details only on January 13, 2001 after the board of directors meets on January 12, 2000," he added.

Desai, however, refused to divulge the name of the dot-com customer.

Mastek said the revenue drop could be higher as the dot-com customer has yet to receive an additional round of funding.

In the release to the BSE, Mastek also cited a delay in closing large accounts with significant offshore potential as the other reason for the expected drop in profits this quarter.

The group's profitability will be further impacted by a charge for stock options granted to employees of its UK subsidiary, leading to 60-70 per cent decline in net profits compared the previous quarter.

The company registered net sales of Rs 250.8 million and net profit of Rs 69.9 million for the first quarter ending September 30, 2000.

In the first quarter, Mastek had a total of seven dot-com clients, accounting for 5 per cent of the company's revenues for the quarter.

That a single client can drag down revenues by as much as 7 per cent proves that the company's business proposition is not viable, say analysts. According to them, Mastek's increasing exposure to dot-coms is unnerving, given the current downtrend in the dot-com market.

The company's board is expected to meet on January 12 to discuss the full-year impact on revenues and profits.

Though the announcement came after trading hours, on the BSE, the Mastek scrip dropped Rs 27.9 on Tuesday to close at Rs 321.75, down 8 per cent from its previous close of Rs 349.7. A total of 26,939 shares were traded during the day.

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